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ITEM 7 / LIQUIDITY AND CAPITAL RESOURCES.....................................................................................................................................................................................The actual amount of collateral that we would be required to post to counterparties in the event of such downgrades,or the aggregate amount of payments that we could be required to make, depend on market conditions, the fairvalue of outstanding affected transactions and other factors prevailing at the time of the downgrade.For a discussion of the effects of downgrades in the financial strength ratings of our insurance companies or ourcredit ratings, see Note 12 to the Consolidated Financial Statements and Part I, Item 1A. Risk Factors.Regulation and Supervision..............................................................................................................................................................................................We are currently regulated by the Board of Governors of the Federal Reserve System (FRB) and subject to itsexamination, supervision and enforcement authority and reporting requirements as a savings and loan holdingcompany (SLHC). In addition, under Dodd-Frank we may separately become subject to the examination, enforcementand supervisory authority of the FRB. In October 2012, we received a notice that we are under consideration by theFinancial Stability Oversight Council created by Dodd-Frank for a proposed determination that we are a systemicallyimportant financial institution (SIFI). Changes mandated by Dodd-Frank include directing the FRB to promulgateminimum capital requirements for both SLHCs and SIFIs. See Item 1. Business – Regulation and Item 1A. RiskFactors – Regulation for further information.Our insurance subsidiaries are subject to regulation and supervision by the states and jurisdictions in which they dobusiness. In the United States, the NAIC has developed RBC Model Law requirements. The RBC formula isdesigned to measure the adequacy of an insurer’s statutory surplus in relation to the risks inherent in its business.The statutory surplus of each of our U.S.-based life and property and casualty insurance subsidiaries exceededminimum required RBC levels as of December 31, 2012. Our foreign insurance operations are individually subject tolocal solvency margin requirements that require maintenance of adequate capitalization. We comply with theserequirements in each country.To the extent that any of our insurance entities were to fall below prescribed levels of statutory surplus, it would beour intention to provide appropriate capital or other types of support to that entity, under formal support agreements,CMAs or otherwise. For additional details regarding CMAs that we have entered into with our insurance subsidiaries,see Liquidity and Capital Resources of AIG Parent and Subsidiaries – AIG Property Casualty and Liquidity andCapital Resources of AIG Parent and Subsidiaries – AIG Life and Retirement.Dividend Restrictions..............................................................................................................................................................................................Payment of future dividends to our shareholders depends in part on the regulatory framework that will ultimately beapplicable to us, including our status as an SLHC under Dodd-Frank and whether we are determined to be a SIFI.See Note 17 to the Consolidated Financial Statements for additional discussion of potential restrictions on dividendpayments to common shareholders.Dividend payments to AIG Parent by our insurance subsidiaries are subject to certain restrictions imposed byregulatory authorities. With respect to our domestic insurance subsidiaries, the payment of any dividend requiresformal notice to the insurance department in which the particular insurance subsidiary is domiciled. Foreignjurisdictions may restrict the ability of our foreign insurance subsidiaries to pay dividends, which may also haveunfavorable income tax consequences. There are also various local restrictions limiting cash loans and advances toAIG Parent by our subsidiaries. See Note 20 to the Consolidated Financial Statements for additional discussion ofrestrictions on payments of dividends by AIG and its subsidiaries...................................................................................................................................................................................................................................AIG 2012 Form 10-K 137
ITEM 7 / INVESTMENTS.....................................................................................................................................................................................InvestmentsOVERVIEW..............................................................................................................................................................................................Our investment strategies are tailored to the specific business needs of each operating unit. The investmentobjectives are driven by the business model for each of the businesses: AIG Property Casualty, AIG Life andRetirement, and the Direct Investment book. The primary objectives are generation of investment income,preservation of capital, liquidity management and growth of surplus to support the insurance products. The majorityof assets backing our insurance liabilities consist of intermediate and long duration fixed maturity securities.Market Conditions..............................................................................................................................................................................................Our investments and investment strategies were affected by the following conditions in 2012:• Central banks initiated actions intended to improve weakening economic conditions, including the European CentralBank’s commitment to further bond purchases and the U.S. Federal Reserve’s commitment to maintain the FederalFunds Rate in the zero to a quarter percent range. The Federal Reserve also committed to support the mortgagemarket via purchases of agency mortgage-backed securities, and extended ‘‘Operation Twist’’, a program ofredeeming short-term U.S. Treasury securities and using the proceeds to buy longer-term U.S. Treasury securitieswith the objective of putting downward pressure on longer-term interest rates.• Equity markets experienced positive returns.• Bond yields remained low in the U.S., as evidenced by the 10-year U.S. Treasury rate ending the year at1.76 percent.• The U.S. dollar weakened during the year by 2 percent and 5 percent versus the Euro and British pound,respectively, and strengthened 13 percent versus the Yen.Investment Strategies..............................................................................................................................................................................................At the local operating unit level, investment strategies are based on considerations that include the local market,general market conditions, liability duration and cash flow characteristics, rating agency and regulatory capitalconsiderations, legal investment limitations, tax optimization and diversification.• In the case of life insurance and retirement services companies, as well as in the DIB, our fundamental investmentstrategy is to match the duration characteristics of the liabilities with assets of comparable duration, to the extentpracticable.• Fixed maturity securities held by the domestic insurance companies included in AIG Property Casualty historicallyhave consisted primarily of laddered holdings of tax-exempt municipal bonds, which provided attractive after-taxreturns and limited credit risk. To meet the current risk-return and tax objectives of AIG Property Casualty, cashflows from the investment portfolio and insurance operations are generally being reinvested by the domesticproperty and casualty companies in taxable instruments which meet the companies’ liquidity, duration and creditquality objectives as well as current risk-return and tax objectives.• Outside of the U.S., fixed maturity securities held by AIG Property Casualty companies consist primarily ofintermediate duration high-grade securities generally denominated in the currencies of the countries in which weoperate.Investment Highlights..............................................................................................................................................................................................The following is an overview of investment activities during 2012:• Purchases of corporate debt securities continued to be the largest asset allocation of new investments...................................................................................................................................................................................................................................138 AIG 2012 Form 10-K
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American International Group, Inc.2
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KEY FACTS & FIGURES52,000+ $65.7 bi
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■We said we would return to profi
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Financial HighlightsYears Ended Dec
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~63,000AIG EMPLOYEES AROUND THE WOR
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$115.1 millionAVERAGE CLAIMS PAID E
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$10,000MAXIMUM DONATION MADE BY AIG
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American International Group, Inc.F
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AMERICAN INTERNATIONAL GROUP, INC.A
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ITEM 1 / BUSINESS / AIG............
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ITEM 1 / BUSINESS / AIG............
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ITEM 1 / BUSINESS / AIG PROPERTY CA
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ITEM 1 / BUSINESS / AIG PROPERTY CA
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ITEM 1 / BUSINESS / AIG LIFE AND RE
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ITEM 1 / BUSINESS / OTHER OPERATION
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ITEM 1 / BUSINESS / OTHER OPERATION
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ITEM 1 / BUSINESS..................
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ITEM 1 / BUSINESS..................
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ITEM 1 / BUSINESS..................
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ITEM 1 / BUSINESS..................
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ITEM 1 / BUSINESS..................
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ITEM 1A / RISK FACTORS.............
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ITEM 1B / UNRESOLVED STAFF COMMENTS
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ITEM 5 / MARKET FOR REGISTRANT’S
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ITEM 6 / SELECTED FINANCIAL DATA...
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ITEM 6 / SELECTED FINANCIAL DATA...
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ITEM 7 / MANAGEMENT’S DISCUSSION
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ITEM 7 / USE OF NON-GAAP MEASURES..
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ITEM 7 / EXECUTIVE SUMMARY.........
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ITEM 7 / RESULTS OF OPERATIONS.....
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ITEM 7 / CRITICAL ACCOUNTING ESTIMA
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ITEM 7 / GLOSSARY..................
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ITEM 7 / GLOSSARY..................
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ITEM 7A / QUANTITATIVE AND QUALITAT
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ITEM 8 / INDEX TO FINANCIAL STATEME
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AMERICAN INTERNATIONAL GROUP, INC.C
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ITEM 8 / NOTE 1. BASIS OF PRESENTAT
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ITEM 8 / NOTE 2. SUMMARY OF SIGNIFI
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ITEM 8 / NOTE 3. SEGMENT INFORMATIO
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ITEM 8 / NOTE 3. SEGMENT INFORMATIO
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ITEM 8 / NOTE 4. DIVESTED BUSINESSE
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ITEM 8 / NOTE 4. DIVESTED BUSINESSE
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ITEM 8 / NOTE 5. BUSINESS COMBINATI
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ITEM 8 / NOTE 6. FAIR VALUE MEASURE
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ITEM 8 / NOTE 7. INVESTMENTS.......
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ITEM 8 / NOTE 8. LENDING ACTIVITIES
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ITEM 8 / NOTE 9. REINSURANCE.......
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ITEM 8 / NOTE 10. DEFERRED POLICY A
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ITEM 8 / NOTE 10. DEFERRED POLICY A
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ITEM 8 / NOTE 11. VARIABLE INTEREST
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ITEM 8 / NOTE 11. VARIABLE INTEREST
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ITEM 8 / NOTE 12. DERIVATIVES AND H
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ITEM 8 / NOTE 13. LIABILITY FOR UNP
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ITEM 8 / NOTE 14. VARIABLE LIFE AND
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ITEM 8 / NOTE 15. DEBT OUTSTANDING.
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ITEM 8 / NOTE 15. DEBT OUTSTANDING.
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ITEM 8 / NOTE 16. CONTINGENCIES, CO
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ITEM 8 / NOTE 17. TOTAL EQUITY.....
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ITEM 8 / NOTE 18. NONCONTROLLING IN
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ITEM 8 / NOTE 19. EARNINGS (LOSS) P
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ITEM 8 / NOTE 20. STATUTORY FINANCI
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ITEM 8 / NOTE 21. SHARE-BASED COMPE
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ITEM 8 / NOTE 21. SHARE-BASED COMPE
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ITEM 8 / NOTE 22. EMPLOYEE BENEFITS
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ITEM 8 / NOTE 24. INCOME TAXES.....
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ITEM 8 / NOTE 26. QUARTERLY FINANCI
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ITEM 8 / NOTE 27. INFORMATION PROVI
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PART II............................
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PART IV............................
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SignatureTitle/s/ ARTHUR C. MARTINE
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ExhibitNumber Description Location(
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Condensed Financial Information of
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Condensed Financial Information of
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Notes to Condensed Financial Inform
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Supplementary Insurance Information
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Valuation and Qualifying AccountsFo
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Subsidiaries of RegistrantExhibit 2
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Percentageof VotingSecuritiesJurisd
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Percentageof VotingSecuritiesJurisd
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CONSENT OF INDEPENDENT REGISTERED P
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CERTIFICATIONSI, Robert H. Benmosch
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CERTIFICATIONExhibit 32In connectio
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SECURITIES REGISTERED PURSUANT TO S
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American International Group, Inc.1
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